AI-Washing: What the Block Layoffs Actually Tell Us About Where We Are
The news broke on February 26, 2026.
Jack Dorsey, co-founder of Block - the company behind Square, Cash App, and Afterpay - announced he was cutting 4,000 employees. Nearly half the company's workforce, gone.
His reason, stated plainly in a letter to shareholders: "Intelligence tools have changed what it means to build and run a company. A significantly smaller team, using the tools we're building, can do more and do it better."
Block's stock jumped 24% overnight.
And every CEO I know had some version of the same thought within 24 hours:
"Should I be doing the same thing?"
I want to give you a proper answer to that question. Not a hot take. Not reassurance. An honest look at what this story actually contains - and what it means for how you lead.
The headline that went viral was not the most important one
When a profitable company cuts 40% of its workforce and the stock surges, that is the headline that travels. It is visceral. It is dramatic. And it lands in boardrooms as a very specific kind of pressure.
If smaller teams plus AI equals higher stock price, what are we waiting for?
But here is what the headline left out:
Block's stock had fallen roughly 40% since the start of 2025 before the announcement. The company had tripled its headcount between 2019 and 2022 - from under 4,000 employees to over 12,000 - in a pandemic-era hiring surge that Dorsey himself later admitted was a mistake. He had made the same admission about Twitter before Elon Musk acquired it and cut 80% of staff.
"The vast majority of these cuts were probably not due to AI," said Zachary Gunn, an analyst at Financial Technology Partners, in comments to Bloomberg. "This is more about the business being bloated for so long than it is about AI."
Former Block employee Jason Karsh was more direct: "This isn't an AI story. It's organizational bloat wearing an AI costume."
Even Sam Altman, CEO of OpenAI, weighed in - noting that some companies appear to be engaging in "AI-washing," falsely attributing AI as the reason for layoffs, and that the real impact of AI on jobs will become palpable over the next few years, not overnight.
Goldman Sachs economists estimate that AI is currently eliminating somewhere between 5,000 and 10,000 jobs per month across all U.S. sectors. That is real. It is also nowhere near enough to explain Block's 4,000 cuts in a single announcement.
What AI-washing actually is - and why it matters to you
AI-washing is not new as a concept. It is the practice of framing business decisions as AI-driven innovation when the real drivers are more conventional - cost pressure, bloated structures, poor management decisions that accumulated over years.
Stanford professor Fred Turner, who studies Silicon Valley culture, told Bloomberg that storytelling has always been central to how the tech industry operates. "Telling stories is one of the core activities of Silicon Valley. It's as important as making devices."
Veteran tech journalist Om Malik called Dorsey's approach "classic narrative substitution" - turning a layoff announcement into a declaration about the future of technology, with AI as the hero of the story.
The problem is not that this narrative is entirely false. AI is genuinely changing what is possible with smaller, focused teams. That is real. I work with leaders on exactly that every week.
The problem is that AI as a cover story for decisions that were going to happen anyway - cost corrections, restructuring, performance management - is becoming a pattern. And that pattern is creating confusion for leaders who are trying to make honest decisions about their own organizations.
If Dorsey's cuts were primarily AI-driven, the evidence should be in the operational redesign:
which workflows changed,
which roles were genuinely replaced by systems,
which processes were rebuilt around AI capability.
Seven employees interviewed by Business Insider after the announcement could not explain the plan. No specifics were provided publicly.
That is not an AI transformation. That is a headcount reduction with an AI press release.
Why this is not an argument against moving fast
I want to be careful here, because there is a real risk of reading this story as a reason to slow down.
It is not.
AI is genuinely changing what is possible with smaller, more focused teams.
Do it well once: deliberately, with your people, with clear governance - and you stop reacting to every new headline. That is the real advantage.
The Block story is not evidence that this shift is not happening. It is evidence that the shift is being exploited as a narrative before the operational reality has caught up.
There is a meaningful difference between:
Moving fast because you have a clear picture of which roles AI genuinely changes, which human capabilities it amplifies, and how you rebuild around both.
And:
Moving fast because the market rewarded someone else for cutting headcount, and you are feeling the pressure to do the same.
The first creates durable advantage. The second creates operational chaos and a trust crisis with the people who remain.
The question your board may not be asking - but should be
In the weeks since the Block announcement, I have noticed a shift in the conversations I am having with CEOs.
More leaders are being asked by their boards and investors:
are we being too slow?
Should we be restructuring for AI efficiency now?
It is a legitimate question. And it deserves a legitimate answer, not a defensive one.
Here is the framework I use:
First - are we cutting or redesigning?
Cutting headcount reduces cost. Redesigning roles around AI capability creates new capacity. These are not the same decisions. Calling the first one the second one does not make it so.
Second - do we know which processes are genuinely AI-ready?
Not AI-capable in a demo. AI-reliable in production. MIT Sloan published research this month confirming that agentic AI - the kind that acts autonomously - is still making too many errors for processes involving real money or real consequences. Your restructuring decisions should be built on what AI can actually do today, not what the vendor promised it will do by Q3.
Third - who owns the humans in this transformation?
Dorsey wore a hat that said "LOVE" on the video call where he announced the cuts. Employees described morale as the worst they had felt in four years. One described the company culture as "crumbling." A 24% stock spike and a crumbling culture can coexist. But they cannot coexist forever.
The leaders building real competitive advantage right now are asking which human capabilities AI makes more valuable - and investing in those deliberately.
What solid ground actually looks like here
I have been guiding leaders through transformation for over 25 years. Through every technology wave since the 1970s. The pattern holds.
The organizations that navigate transition well are the ones that move with visibility:
They know what they are actually changing and why.
They can explain the reasoning to the people it affects - not with a press release, but in a room.
They redesign roles with their people rather than to them.
And they build the governance structures that allow AI to do what it is genuinely good at, while keeping humans accountable for everything that requires judgment.
That is not slower. It is smarter.
The fog around AI is real. Every week brings a new headline, a new capability, a new reason to feel behind. The Block story is the latest one. It will not be the last.
But the fog does not lift by itself. And the answer is not to make the same cuts Dorsey made and call it an AI strategy.
The answer is to get clear enough on your own organization - your real bottlenecks, your genuine AI opportunities, your people's actual capacity to absorb change - that the decisions you make are yours.
Not reactions to someone else's press release.
If this landed somewhere real for you - if you are sitting with questions about what AI transformation actually looks like in your organization, where the genuine opportunity is, and how to move without leaving your people behind - that is exactly what the AI Clarity Call is for.
30 minutes. A real conversation. You will leave with more clarity than you arrived with.
